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Consumer Rights in Covid Times

Updated: Feb 2


Consumer Rights

Are you wondering whether you need to give your customers a full refund for services that have been prevented as a result of government restrictions? Well read on to see when a refund is required....


The Competition & Markets Authority (the CMA), which is the regulatory body for consumer rights, has set out some guidance as to what refunds consumers are entitled to in the event that a service cannot be provided due to government restrictions imposed on businesses.


In August 2020 they issued new guidance in light of Covid-19 and the impact on consumer contracts:


https://www.gov.uk/government/publications/cma-to-investigate-concerns-about-cancellation-policies-during-the-coronavirus-covid-19-pandemic/the-coronavirus-covid-19-pandemic-consumer-contracts-cancellation-and-refunds


The CMA guidance states that as a general rule, your clients (if consumers) would have to cancel the contract on your agreed business terms. However, you still have a duty under consumer laws (The Consumer Rights Act 2015) to treat them fairly. Any clauses prohibiting the refund of deposits or restrictions on refunds for example, may not be regarded by the CMA as being fair and reasonable in light of the circumstances, and so a Court or the CMA would look at all the surrounding facts.


You will be entitled to rely on your existing business terms only if you can show that this is fair and reasonable in the circumstances. This would have to be to cover losses and expenses your business has suffered as a direct result of the service being cancelled.


You would need to show specifically what expenses you have incurred for that particular customer and what you have spent their money on. The key point is that the losses and expenses must be a direct result of their booking/cancellation.


Equally, if you have not spent money with other third party suppliers for their services, then it would be tricky to argue that no refund (or just a partial refund) is fair and reasonable in the circumstances, and you should be giving them a full refund.


In order to retain any fees, you would need to be able to argue that retaining it is fair, reasonable and in line with CMA guidance. You would need to be able to prove that the amount of the retained fees is a true reflection of monies spent by your business for that particular customer (for which you cannot recoup).